Expect CAE Inc. (CGT) shares to be in a holding pattern for the time being, says Versant Partners analyst Cameron Doerksen.
"We are becoming increasingly concerned about the near-to-mid-term outlook for pilot training, the analyst told clients in a note. "We also do not see any significant positive catalysts for the stock in the upcoming quarters."
The analyst told clients that global airline capacity reductions and slowing growth in India and China are bound to impact CAE's training revenues and margins. As well, he said decreased utilization of business jets will reduce demand for higher margin "wet" training in the company's simulator network.
He downgraded the stock, already down 30% year-to-date, from "buy" to "hold" and lowered his price target from C$14 to C$9.50, adding that further downside is "probably limited" given the beating the shares have taken this year and CAE's solid long-term prospects. CGT was down 8.7% Monday to $8.19.
Amounts shown in US$ unless otherwise indicated.